Gatorade president and MCP 2012 honoree Sarah Robb O’Hagan talks about how a hard decision about the brand’s audience shifted an entire marketing strategy.

No Gatorade shower could extinguish the flaming mess Sarah Robb O’Hagan inherited when she took over the legendary sports-drink brand four years ago. Its message had been simplified to the point of uselessness: Hydration is good, and something or other about electrolytes. Most of its new products were just new flavors, with names that sounded like American Gladiators rejects–Fierce, Frost, Rain, X-Factor–which cut into older drinks’ sales. And it was fighting for attention with every other neon-colored liquid in convenience-store coolers. Sales for the multibillion-dollar brand flatlined in 2007, then went cliff diving: The flagship had dipped almost 10% in the 52 weeks before she took the job amid the blizzard (not a Gatorade flavor name) of muddled extensions, while rival Powerade gained 13%.

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And that’s when Robb O’Hagan, who left her job as a Nike general manager in mid-June 2008 to move to Chicago for Gatorade . . . promptly went on maternity leave.

It was the best thing she could have done, though it hardly seemed so at the time. “I was at home with a new baby, and the retailers were up in arms,” she recalls in her native New Zealand accent. “They were like, ‘What the hell are you people doing?’ ” In the little free time she had while on leave, Robb O’Hagan dove deep into who drinks Gatorade and why. The numbers told a story: Though the brand acted like the PepsiCo property it was, blasting mass-market advertising to men ages 18 to 49, Gatorade consumers had defined themselves. High-school athletes made up 15% of customers; marathoners and weekend-warrior types made up another 7%. But those folks loved Gatorade; that 22% combined for 46% of all sales.

What would happen, Robb O’Hagan wondered, if Gatorade started ignoring everyone else–literally, just stopped marketing to them–and respun itself as a brand devoted to athletic prowess? It had worked well at Nike, certainly. When she came back to the office, she pitched it to her then-boss, CEO of PepsiCo Beverages Massimo d’Amore. “This is my Jerry Maguire moment,” she says. “I said, ‘It’s okay if you want to fire me, but this is what we have to do, and we have to start saying no to a lot of stuff that retailers are asking us to do, that Wall Street is asking us to do, and we just have to serve the athlete and act like a sport-performance company. And it’s going to be a long, hard journey.’ And credit to him: He said, ‘Okay, we’re in.'”

The market segments Robb O’Hagan had chosen to focus on were completely different–high-school athletes who didn’t know much about nutrition, and fitness and endurance athletes who already had preferred brands. That required recalibrating Gatorade’s assumptions.

First, Robb O’Hagan looked into research on when kids stop playing for fun and start competing. That seems to happen around age 11, so Gatorade began making more of a push with coaches of that age level. It also revised lesson plans at its 4,000-plus sponsored summer camps and sports tournaments to stress a connection between nutrition and performance. And for the older, savvier crowd, rather than make singular, huge marketing pushes, Gatorade has begun supporting training groups organized by local stores. “In marathons, people want to train with the products they’ll then use on the course,” she says. She knows this from personal experience: She runs about 25 miles a week and finished her first triathlon this year.

In the past, Gatorade spent 90% of its marketing budget on TV; Robb O’Hagan blew that up. Now 30% goes to digital, including niche sites such as stack.com, the kind of place high-performance athletes visit to learn Peyton Manning’s footwork drills. Gatorade is also currently unveiling a system called the Gatorade Edge, which athletes can use to track their performance, learn how to improve, and compare themselves to athletes around the country. “If even 100 athletes do it in the first year,” she says, “if those athletes are changing the culture of sport, that’s the beginning of, 10 years from now, a huge influence.”

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Marketing to 100 people? That’s sacrilege at the $66-billion-a-year PepsiCo, a ridiculous waste of time. But this is the game Robb O’Hagan is playing. “We keep reassuring [retailers and partners], ‘You’re not going to see us as much as you’re used to seeing us, but the organic pull behind the brand is going to be there,’ ” she says.
Meanwhile, she has diversified and clarified the product line. Instead of esoteric flavors, Robb O’Hagan focused on what athletes need pre-, during, and post-activity. She added energy gels and bars for before exercise, focused the traditional sports drink on in-game hydration, and developed protein-infused smoothies and shakes for recovery. And she made it easy with a 1-2-3 system.

Why on earth would you spend money on Super Bowl ads when players are drinking our products during the entire game?

The final phase of her plan, an initiative that’s rolling out now, is to establish Gatorade as a hub of fitness knowledge. The gleaming, high-tech Gatorade Sports Science Institute is a 1,500-square-foot facility near the company’s Chicago headquarters, designed to help sponsored athletes such as Dwyane Wade improve body composition. During Super Bowl weekend this past February, at an Indianapolis hotel in the center of fan madness, a makeshift GSSI lab was built inside a conference room. Glass walls let crowds gawk as hulking candidates for the NFL draft did things like furiously tap a wall full of buttons to test reflexes and peripheral vision. Robb O’Hagan wants to bring the concept to the masses, to create an international chain where mere mortals can come in, be tested, and leave with a comprehensive nutrition and fitness plan. Two more have opened so far, in Florida and Loughborough, England. “We’ve got to promote understanding of the category,” Robb O’Hagan says. “And because we at the brand are bringing it to you, we, by definition, should get the credit that comes with it.”

Pro athletes have taken notice–which matters, because this small constituency will provide Gatorade’s proof of concept, the most visible link between success and the brand’s promise. “I’d never met the president of Gatorade until I met Sarah,” says Abby Wambach, one of the best female soccer players in the world, who signed with the brand a few years before Robb O’Hagan joined. “She’s engaging with you whether you’re an athlete or a brother or sister of the athlete. If Sarah called and needed something from me, even if it was outside the confines of my contract, I’d do it for her.”

All this activity has Gatorade on the rebound. Its 2011 sales exceeded $3 billion, according to Symphony/IRI, an increase of almost 9% from a year earlier. Says Thomas Mullarkey, an analyst at Morningstar: “The better understanding they have for the nutritional needs of athletes, the better they’re able to meet their taste requirements.”

On the morning of the Super Bowl, PepsiCo execs gather in an Indianapolis auditorium to present a “chalk talk” for retailers, sponsors, and various other partners. The Doritos team shows off its crowdsourced commercials. The Pepsi and Frito-Lay heads have teamed up to showcase their “Go for Two” campaign. There is lots of clapping. Lots of rah-rah.

Then it’s Robb O’Hagan’s turn.

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“How many people got out there and went running this morning?” she begins. Silence. In the back row, one person raises a hand. “Oh, there’s one! There you go. There’s a win from within,” she says, using Gatorade’s new tagline in a sentence as only a marketer can.

Not that long ago, just months before Robb O’Hagan took the Gatorade job, the brand used two Super Bowl commercials, one starring Yankee great Derek Jeter, to launch a new low-calorie drink. The ads–and the drink–were largely ignored by fans and critics alike. Robb O’Hagan is still incredulous about the gambit. “Why on earth would you spend money on Super Bowl ads,” she tells me privately, “when players are drinking our products during the entire game?”

Onstage, having made her point implicitly, she lays it out cleanly: “What we’ve been doing is very different from our brother and sister brands. We’re not doing a big TV spot. Instead, we’re inside the bodies of the athletes actually playing on the field.”

To the customers she courts, that’s what matters.

Photos by Dylan Coulter

A version of this article appears in the June 2012 issue of Fast Company.